You gotta be mobile to avoid tax
The exodus abroad of British companies – Charter, Henderson, Regus have joined the list – has renewed calls to cut UK corporation tax. But the less they pay, the greater the burden on people that cannot move.
The shipping companies had their tax cut when they threatened to register their fleets overseas. The betting tax was slashed when gambling companies started moving offshore. When non-doms were asked to pay tax in their chosen country they warned that they would move elsewhere.
Now major corporations are deciding whether to go to Bermuda or Switzerland or simply move next door to Ireland rather than suffer the UK tax regime.
The power lies with those that can move abroad.
Tax avoidance is legal of course, but the more special cases that threaten to quit unless they get better terms, the more the Treasury has to resort to squeezing those who cannot, or do not want to, shift their base.
It is a difficult choice for a chancellor who wants to keep a corporate base in Britain, even if it comprises gambling companies. In the end, charging them half their tax due and keeping them here is always better than demanding full payment and receiving none because they have gone.
Constant changes to the tax system to appease companies and executives making threats undermines the chancellor’s authority, of course, but it also undermines a government’s popularity because it increases taxes for the only payers that have votes – the general public.
Reducing consumers’ spending power will hit the UK profits of the groups going abroad, but most of these emigrating companies have substantial businesses abroad (and some have paid no UK tax for years thanks to reliefs, anyway).
If the corporate exodus has an upside it should be to simplify the UK tax system rather than cut rates, and government spending should be reduced rather than the public be asked to replace the lost tax.
